One of the best parts of being a freelancer is that you can handle your financial tracking and reconciliation or create invoice templates in any way you want. The downside is that you'll also be managing your self employment taxes, something that many self-employed business owners don't have a lot of experience dealing with. The good news is that it's now easier than ever for anyone with an internet connection to get help and handle their taxes and bookkeeping tasks like a pro.
What should you know before getting started? For one, it’s much easier to do things right from the get-go, rather than try to make sense of many months of and organize tax receipts as well as invoices. Since it can be difficult to determine just what your needs are at first, however, it might be beneficial to try out a few different solutions to see what feels best. While many of the software products on the market offer the same functionalities, the look or feel of an app may be all you need to feel at home.
If you’re not currently using software to run the money side of your freelance business, it’s time to get started. Check out our list of the top tools all freelancers should check out when making sure their money matters are in tip-top shape!
Before you can even begin to think about filing taxes, you'll need proper accounting of every expense and wage you've had for the year (so you can identify all 1099 business expenses that can be deducted from your taxable income). While it's possible to go back through all your bank and credit card statements when taxes are due, it's much easier to plan from day one to keep good records with innovative accounting software solutions. You don't need a degree or even much experience to make these options work for you. Check out or review of the best apps to track receipts for taxes.
See which accounting software are most popular among today's freelance professionals.
What list would be complete without our own service included? Designed to be the all-in-on 1099 expense tracker, Bonsai lets you import all your expenses and keep track of everything. No need to switch from what platform to the others, login to your Bonsai account and keep track of all your proposals, contracts, revenues, and expenses!
Did you know that you can use Bonsai for accounting? Or that Bonsai can help you be prepared for your taxes by providing tax estimates, filling date reminders, and identifying your tax write-offs?
Let's see how that works. First, head to your main Bonsai dashboard and have a close look on the left side - we'll be working with the accounting and taxes sections. First click on "Accounting".
Inside the accounting section, you'll see a breakdown of your income and expenses. Both can either be automatically imported from your bank account, or manually added. Work you got paid for via Bonsai will also be registered here.
Make sure this section is properly filled in and click on "Taxes" next.
This is where the magic happens: Bonsai will do all the calculations for you, and we'll provide you with an overview of your tax estimates, a list of tax deductions you can use for the upcoming tax season, and reminders for all the upcoming filling dates.
Simple, right? If you're ready to check out Bonsai and explore all the features, go ahead and sign up for the free trial!
Formerly Outright, this is among the most popular tools for independent contractors. An all-in-one time tracking, billing, invoicing, and reporting tool, the GoDaddy Bookkeeping web-based service makes it easy to go from finished client project to Schedule C. It can also tell freelancers at a glance where they stand for the quarter with taxes owed. At a price of less than $12 a month, its recurring subscription model fits most budgets.
Preferred by over 4 million business owners worldwide, Intuit’s QuickBooks software can be used by freelancers for as little as $5 per month. The beautiful interface and integration with most major banks, as well as tools like Shopify and PayPal. It’s also easy to keep track of expenses on the go with their mobile “photo” feature that allows for digital tracking and categorizing. Even the most basic plans use the same proprietary tech that is loved by professional bookkeepers using the more advanced plans.
This cloud-based accounting solution for business owners has earned the praises of notable entrepreneurs such as Pat Flynn and Roman Mars. Designed to help busy freelancers save hours of time each year, FreshBooks is a mobile-friendly solution that boasts 4 million active users. It's powerful enough for big agencies but available as a more modestly-priced freelance plan; pay just $15 for the lite plan after a 30-day free trial.
Not sure that paying for a monthly plan is for you? The unique difference with Wave is that you pay as you go. No monthly minimums are needed for this cutting-edge billing, invoicing, receipt-scanning, and expense-tracking tool. Wave makes its money by processing all major credit cards used to get you paid. If you don’t process any payments in a month – you pay nothing!
Do you know the minimum amount you need to earn before you must file taxes? Unlike other Americans, who can avoid filing if they fall below certain thresholds based on filing status and age, all freelancers or self-employed business owners who earn more than $400 of any income in a year must file. The chances are excellent that you'll have to handle your own form filling and filing and get everything in on time with the IRS – regardless of how successful you feel like your freelance business was in 2017.
While you can hire an accountant or tax professional to complete and file your taxes each year (or even each quarter), most of the tax needs of the average freelancer can be handled with many of the small business software products on the market. In fact, most have been updated with freelance-focused topics, and their help sections have extensively addressed the concerns of a typical independent contractor – regardless of your industry.
Assuming you have a detailed record of all of your income and expenses for the year, answering the questions in most software services will be simple. Remember, as a freelancer, you'll have more forms and calculators than the average filer, so expect to pay a bit more for small business versions of the most popular products. It's worth the extra cost, however. The savings you can realize over having a tax preparer do it for you is between $100 - $700 a return!
The market is continually adding new players to the DIY tax game, but the same major companies have held the lead. While it's not recommended to try out a company that's entirely new for you, most of the best-known brands have earned a solid reputation for freelancers of all financial skill levels. The most popular and reliable options continue to be:
Owned by financial products powerhouse Intuit, TurboTax is one of the most popular and reliable tax products on the market today. Available as a download or CD, many freelancers also opt for their online web service, which lets you fill out your taxes and see what you’ll owe (or get back) before you commit to filing. You only pay if you file, and the cost for the federal return product is between $89 – 120. State returns are extra. (Note: If you choose the CD or downloadable option, it’s easy to import last year’s info for even speedier filing.)
Made famous by their brick-and-mortar shops, freelancers can now use H&R Block’s trusted tax services from the comfort of their own home. The Self-Employed version of their online software starts at $75, plus extra for state returns and optional review of your return from a tax professional. In addition to containing all the forms a freelancer would need (such as Schedule C), there is a unique transfer function to help Uber drivers and any businesses who use Stride in transferring information from their work records directly to their tax forms.
Known for its free filing option for the simplest of returns, TaxAct now has a suitable software option for freelancers. For less than $45 (the cheapest in the industry), independent contractors can maximize deductions and file the forms for free – with an additional charge for state forms. Choose to download the software or use the program online.
It takes both pieces – accounting and tax filing – to ensure a stable financial footing for independent contractors. Even if this is your first year handling taxes on your own, it can be made much simpler with the right tool. Whether you choose to use a mobile app, online program, or downloadable software, the features of today's tax and accounting products are intuitive enough for almost every freelance business need. Save money by doing your accounting and filing and put the extra toward investment in your freelance career!
Start tracking your expenses, identifying tax deductions, and estimating your quarterly taxes with Bonsai by signing up for a free trial today.
A verbal contract (formally called an oral contract) refers to an agreement between two parties that's made —you guessed it— verbally.
Formal contracts, like those between an employee and an employer, are typically written down. However, some professional transactions take place based on verbally agreed terms.
Freelancers are a good example of this. Often, freelancers will take on projects having agreed on the terms and payment via the phone, or an email. Unfortunately, sometimes clients don't pull through on their agreements, and hardworking freelancers can find themselves out of pocket and wondering whether a legal battle is worth all the hassle.
The main differences between written and oral contracts are that the former is signed and documented, whereas the latter is solely attributed to verbal communication.
Verbal contracts are a bit of a gray area for most people unfamiliar with contract law —which is most of us, right?— due to the fact that there's no physical evidence to support the claims made by the implemented parties.
For any contract (written or verbal) to be binding, there are four major elements which need to be in place. The crucial elements of a contract are as follows:
Therefore, an oral agreement has legal validity if all of these elements are present. However, verbal contracts can be difficult to enforce in a court of law. In the next section, we take a look at how oral agreements hold up in court.
Most business professionals are wary of entering into contracts orally because they can difficult to enforce in the face of the law.
If an oral contract is brought in front of a court of law, there is increased risk of one party (or both!) lying about the initial terms of the agreement. This is problematic for the court, as there's no unbiased way to conclude the case; often, this will result in the case being disregarded. Moreover, it can be difficult to outline contract defects if it's not in writing.
That being said, there are plenty of situations where enforceable contracts do not need to be written or spoken, they're simply implied. For instance, when you buy milk from a store, you give something in exchange for something else and enter into an implied contract, in this case - money is exchanged for goods.
There are some types of contracts which must be in writing.
The Statute of Frauds is a legal statute which states that certain kinds of contracts must be executed in writing and signed by the parties involved. The Statute of Frauds has been adopted in almost all U.S states, and requires a written contract for the following purposes:
Typically, a court of law won't enforce an oral agreement in any of these circumstances under the statute. Instead, a written document is required to make the contract enforceable.
Contract law is generally doesn't favor contracts agreed upon verbally. A verbal agreement is difficult to prove, and can be used by those intent on committing fraud. For that reason, it's always best to put any agreements in writing and ensure all parties have fully understood and consented to signing.
Verbal agreements can be proven with actions in the absence of physical documentation. Any oral promise to provide the sale of goods or perform a service that you agreed to counts as a valid contract. So, when facing a court of law, what evidence can you provide to enforce a verbal agreement?
Unfortunately, without solid proof, it may be difficult to convince a court of the legality of an oral contract. Without witnesses to testify to the oral agreement taking place or other forms of evidence, oral contracts won't stand up in court. Instead, it becomes a matter of "he-said-she-said" - which legal professionals definitely don't have time for!
If you were to enter into a verbal contract, it's recommended to follow up with an email or a letter confirming the offer, the terms of the agreement , and payment conditions. The more you can document the elements of a contract, the better your chances of legally enforcing a oral contract.
Another option is to make a recording of the conversation where the agreement is verbalized. This can be used to support your claims in the absence of a written agreement. However, it's always best to gain the permission of the other involved parties before hitting record.
Fundamentally, most verbal agreements are legally valid as long as they meet all the requirements for a contract. However, if you were to go to court over one party not fulfilling the terms of the contract, proving that the interaction took place can be extremely taxing.
So, ultimately, the question is: written or verbal agreements?
Any good lawyer, contract law firm, or legal professional would advise you to make sure you formalize any professional agreement with a written agreement. Written contracts provide a secure testament to the conditions that were agreed and signed by the two parties involved. If it comes to it, a physical contract is much easier to eviden in legal circumstances.
Freelancers, in particular, should be aware of the extra security that digital contracts may provide. Many people choose to stick to executing contracts verbally because they're not sure how to write a contract, or they think writing out the contract terms is too complicated or requires expensive legal advice. However, this is no longer the case.
Today, we have a world of resources available at our fingertips. The internet is a treasure trove of invaluable information, platforms, and software that simplifies our lives. Creating, signing, and sending contracts has never been easier. What's more, you don't have to rely on a hiring a lawyer to explain all that legal jargon anymore.
There are plenty of tools available online for freelancers to use for guidance when drafting digital contracts. Tools like Bonsai provide a range of customizable, vetted contract templates for all kinds of freelance professionals. No matter what industry you're operating in, Bonsai has a professional template to offer.
A written contract makes the agreement much easier to prove the terms of the agreement in case something were to go awry. The two parties involved can rest assured that they're legal rights are protected, and the terms of the contract are sufficiently documented. Plus, it provides both parties with peace of mind to focus on the tasks at hand.
Bonsai's product suite for freelancers allows users to make contracts from scratch, or using professional templates, and sign them using an online signature maker.
With Bonsai, you can streamline and automate all of the boring back-office tasks that come with being a freelancer. From creating proposals that clients can't say no to, to sealing the deal with a professional contract - Bonsai will revolutionize the way you do business as a freelancer.
Why not secure your business today and sign up for a free trial?